In a blow to the South Korean cryptocurrency industry, the CEO of major exchange Bitsonic, Jinwook Shin, has been sentenced to seven years in prison for operating a sophisticated fraudulent scheme totaling 10 billion won, approximately $7.6 million.

Judge Lee Jong-chae of the Seoul Eastern District Court delivered the verdict, finding Shin guilty alongside Bitsonic’s vice president of technology, Bae, who received a one-year prison term. Both were charged with fraud, forgery of business records, and obstruction of business through computer manipulation.

Inflating Prices, Stealing Deposits

The court found that Shin, from January 2019 to May 2021, manipulated trading volumes using Bitsonic’s own funds to inflate the price of its self-issued digital currency, Bitsonic Coin (BSC). Additionally, he created false Korean Won deposits within the system, presenting an illusion of cash flow that never existed.

Under the guise of legitimacy, Shin reportedly exploited his position to defraud over a hundred investors, stealing their cash and virtual assets worth approximately 10 billion won. Bae was found complicit in developing and implementing programs to facilitate the fraudulent activities within the transaction system.

Stark Reminder Of Industry Risks

This verdict serves as a stark reminder of the potential pitfalls within the cryptocurrency industry, highlighting the crucial need for robust regulations to protect investors. As authorities crack down on such fraudulent activities, the court urged users to exercise caution and conduct thorough due diligence before engaging with any virtual asset exchange.

Impact On Bitsonic And Crypto Industry

The future of Bitsonic remains uncertain following the scandal. The exchange has not yet issued an official statement regarding the verdict’s impact on its operations or potential customer compensation. Industry experts anticipate increased scrutiny and stricter regulations for cryptocurrency exchanges in South Korea as a result of this case.

Not All Exchanges Alike

While this incident raises concerns about industry risks, it’s important to remember that not all cryptocurrency exchanges operate fraudulently. Numerous reputable and regulated exchanges prioritize transparent operations and investor protection. However, the Bitsonic case emphasizes the importance of careful research and due diligence before investing in any cryptocurrency platform.

Call For Clearer Regulations

The verdict has reignited discussions surrounding the need for clearer regulations in the South Korean cryptocurrency market. While the country currently enforces anti-money laundering (AML) and know-your-customer (KYC) regulations, some experts argue for stricter oversight to prevent similar fraudulent activities.

The global cryptocurrency industry is also likely to be impacted by this case, potentially leading to increased scrutiny and calls for international regulatory frameworks. Investors worldwide are advised to remain vigilant and prioritize secure, reputable platforms for their cryptocurrency activities.

Featured image from iStock, chart from TradingView